Higher interest rates may benefit the top slice in a recession, but the attempt not to have a recession at all – by central banks “printing money” and buying government bonds, known as quantitative easing (QE) – also creates a bonanza for the rich by swelling the value of their assets.
Rich get richer because of appreciation of assets and access to capital due to assets. They take on much more debt than the poor but use that debt to invest/acquire more assets.
Not everyone, however, lost money during the worst economic downturn in American history. Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.
The well-worn assertion that the rich get richer while the poor get poorer echoes Karl Marx's theory of immiseration which said that capitalists could only become richer by lowering wages, thereby reducing the living standards of workers until they had no choice but to revolt.
Poor People Buy Liabilities, Rich People Buy Assets
Poor people tend to spend their money on liabilities — items that depreciate over time — such as luxury goods, excessive entertainment, or expensive cars. In contrast, the rich focus on acquiring assets — investments that generate passive income or appreciate.
Such injustice is what Jesus denounces through this parable of the talents. At the end of the parable, Jesus says, “For to everyone who has, more will be given and he will grow rich; but from the one who has not, even what he has will be taken away” (Mt. 25:29). The rich get richer, the poor get poorer.
Treasurys, says Collins, are similar to government and corporate bonds, as they are backed by the full faith and credit of the U.S. government. They are typically seen as safe investments during a recession. "In times of market volatility, investors may flock toward Treasury bonds, seeking stability," he says.
Poor budget choices and failure to follow basic financial principles can send even the richest people with a high net worth into debt. Millionaires have more money than most of us can imagine. To put into perspective $1 million equates to 588 months, or 49 years, of the average rent price in America.
In the U.S., it may take you $5.81 million to be in the top 1%, but it takes a minimum net worth of $30 million to be considered among the ultra-high net worth crowd. As of the end of 2023, this ultra-high net worth population is on the rise, reaching 626,000 globally, up from just over 600,000 a year earlier.
Wealthy family buys stocks, bonds, real estate, art, or other high-value assets. It strategically holds on to these assets and allows them to grow in value. The family won't owe income tax on the growth in the assets' value unless it sells them and makes a profit.
The industries known to fare better during recessions are generally those that supply the population with essentials we can't live without. They include utilities, healthcare, consumer staples, and, in some pundits' opinions, maybe even technology.
He said those who were prepared during the 2000 recession, the 2008 recession and the 2020 recession made bank when the markets crashed because they were ready to move in while everyone else pulled out. Basically, it all comes down to getting set up to invest at a time when your competitors are fleeing the scene.
Billionaire ranks are gaining wealth from business and investment growth and the economics of where they live, but rising stock markets and “firmer 'risk-on' sentiment across most other asset classes,” spurred many of the gains, the report said.
Could the Great Depression happen again? It could, but such an event is unlikely because the Federal Reserve Board is unlikely to sit idly by while the money supply falls by one-third.
The best performing investments during the Depression were government bonds (many corporations stopped paying interest on their bonds) and annuities.
The economic collapse was terrifying in its scope and impact. By 1933 average family income had tumbled 40 percent, from $2,300 in 1929 to just $1,500 four years later.
What Are the Biggest Risks to Avoid During a Recession? Many types of financial risks are heightened in a recession. This means that you're better off avoiding some risks that you might take in better economic times—such as co-signing a loan, taking out an adjustable-rate mortgage (ARM), or taking on new debt.
Stocks and bonds have relatively low transaction costs, allow you to diversify more easily and leave your cash more liquid than real estate (although the stock market is typically more volatile than the housing market). Meanwhile, real estate is a hedge against inflation and has tax advantages.
Depression is about 50% more common among women than among men. Worldwide, more than 10% of pregnant women and women who have just given birth experience depression (2).
In 1 Timothy 6 Paul also asks the wealthy to be rich in generosity: “They are to do good, to be rich in good works, to be generous and ready to share, thus storing up treasure for themselves as a good foundation for the future, so that they may take hold of that which is truly life” (6:18-19).
Social influence often induces a rich-get-richer phenomenon (Matthew effect) where popular products tend to become even more popular.
Jesus said to his disciples, “I can guarantee this truth: It will be hard for a rich person to enter the kingdom of heaven. I can guarantee again that it is easier for a camel to go through the eye of a needle than for a rich person to enter God's kingdom.” He amazed his disciples more than ever when they heard this.